What does it mean for an appraisal award to be made without authority? The San Antonio court of appeals answered this bradley witham  question in 1996. See Toonen v. USAA, 935 S.W.2d 937 (Tex. App. – – San Antonio 1996). According to Toonen, a contest based on lack of authority is exactly as it sounds. It is a claim by one of the parties that the appraiser that was selected did not have authority to act on behalf of the party. In Toonen, before the insured had hired an attorney, she hired a private adjusting firm to represent her in her hailstorm claim. In that regard, the adjusting firm contacted the insurance company claiming that it was the insured’s authorized appraiser. The appraisal process moved forward, and the insurance company tendered the full amount of the agreed upon appraisal award.

The insured, unhappy bradley witham  with the amount of the award, opted to file suit, and in her attempt to have the appraisal award set aside, she claimed that although she had agreed for the private adjusting company to handle her insurance claim, she did not authorize the company to agree to the appraisal process. The Court examined whether the private adjusting company, as an admitted agent of the insured, had authority to act on behalf of the insured.

In Texas, an agent’s authority to act for its principal may be demonstrated in any one of three ways: express actual authority, implied actual authority, or apparent authority. The Court agreed that the insurance company had not conclusively established that the private adjuster acted with express actual authority. Therefore, the Court examined whether the private adjuster acted with implied actual authority or apparent authority.

Implied actual authority arises when “appearances justify a finding that in some manner the agent was authorized to do what he did.” Apparent authority “is a form of estoppel where a third party relies on conduct of the principal which would lead a reasonably prudent person to believe the agent had authority to act.” The Court noted that the insurance company had put forth sufficient evidence showing that it [the insurance company] reasonably believed that the private adjuster had authority to act on the insured’s behalf in invoking the appraisal clause. More importantly, the insured, upon learning that the private adjuster had participated in the appraisal process, took no action to disavow the conduct.

This case demonstrates the potential problems that policyholders can encounter when they engage the services of a public adjuster but later decide to retain legal counsel to file suit. The left hand (the attorney) often does not know what the right hand (the public adjuster) has already done, and the attorney may be unable to cure the adjuster’s conduct.